State pays premium for property in path of Cimarron interchange project

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You know what they say about real estate: Location, location, location.

Nobody knows that better than Harry Hoth. The Colorado Springs businessman, former longtime owner of KRDO television station and Springs mayor in the 1960s has had two different agencies in need of his land for public projects in the past 20 years, and he was paid both times for the same property.

Not that there's anything wrong with that. It's incumbent on the government to compensate landowners when their property is needed for a public project.

One of those currently happening here is the $113 million Cimarron Street/Interstate 25 interchange project, which will improve safety and enlarge capacity through a massive redesign.

To clear the way, the Colorado Department of Transportation paid seven landowners $6 million for 13.7 acres of land. That was 24 percent higher than appraised value — substantially more than the average of 6 percent above appraised value the state usually pays. But that's because of special circumstances, CDOT officials say.

The interchange project — from Colorado Avenue south to the South Nevada Avenue exit and east of Eighth Street to the Cimarron Street bridge over Fountain Creek — is well underway and is projected to be finished in late 2017.

It got started years ago with initial design, and the first parcel, a condemned hotel, was purchased in 2012. As with any highway project, CDOT officials conducted appraisals, Rees says, but also offered to pay for appraisals done on behalf of property owners.

Values can exceed the mere face value of a parcel for a number of reasons. For example, the state might need half of a 10-acre tract used for grazing horses; by cutting the property in half, it's no longer adequate for that purpose. "So we'll buy the whole property," she says, as well as pay relocation costs.

CDOT takes into account both appraisals and then makes an offer, which can lead to negotiations; 72 percent of acquisitions are settled at that point, Rees says. Another 22 percent are settled following an "administrative" process in which other factors are taken into account. One such factor might involve a revenue-generating billboard located on property the state wants, as with 2.9 acres owned by Michael DeVriendt, a partner in Pikes Peak Motor Co. at 221 S. Chestnut St.

The business, which deals in vintage auto parts and antique, collectible vehicles, had a billboard leased to Cave of the Winds, says DeVriendt's partner, Rich Murr.

"They paid an annual lease," Murr says, which disappeared with the billboard to make way for the interchange.

Another reason the parcel commanded the highest price of any near the interchange: "We were by far the largest parcel and had the most square footage in existing buildings," Murr says.

While the property appraised at $1,713,400, the state paid DeVriendt $2 million, records show. "The DeVriendt parcel settlement was based on a split between the difference of the CDOT and property owner appraisals," says CDOT spokesperson Amber Billings in an email.

"The whole process of the move took us a year," Murr says, noting dozens of vehicles and thousands of parts were moved with trailers and roll-off containers to a new location in Penrose. "They paid us more for obvious reasons."

As Murr tells it, "You have to fight for it. You've got to justify what they paid, and they certainly don't just hand it over. They paid realistic value for that ground."

The state compensated E.D.R. Allinn LLC, with $1,190,000 on Dec. 27, 2012, for the condemned Express Inn (formerly Holiday Inn) hotel, although it appraised much lower, at $645,000. Driving the payout upward was the LLC's acquisition of the property the year before for $1,100,050 through a foreclosure action. (CDOT is barred by law from bidding on property in foreclosure.) So the hotel owner saw a profit of $89,950 for its one-year ownership.

The foreclosure purchase price, Billings says, "had a big impact on the settlement we reached, because that could be considered the property's value."

Hoth's property, once occupied by Pikes Peak Nurseries on the southwest corner of Cimarron and I-25, lay in the path of a city water pipeline in the 1990s. He was paid $500,000 by the city for permission to bury the pipe beneath the land in addition to disruption of business due to the project. For the interchange project, the state acquired a roughly 3.25-acre parcel from Hoth for $600,000, about 15 percent more than the fair market value appraisal of $519,989. The settlement amount was a compromise with the landowner based on both appraisals, Billings says.

The only acquisition of the seven that was decided in court was a 1-acre parcel owned by Chestnut Street Partners, an entity controlled by Danny Mientka of The Equity Group. Mientka is among the developers involved in the South Nevada Avenue urban renewal project.

The property appraised at $559,000, but the state was ordered by the court to pay $695,000. Rees notes that CDOT is discouraged from low-balling property by a rule that allows a property owner to recover court costs and attorney fees if the court-ordered value is 30 percent or more above CDOT's offer.

The only parcel for which the state paid appraised value was a 1-acre tract owned by Walmart Real Estate Business Trust. The state bought the land for $664,400.